Schechter squeezed; america as the bubble bursts (2007)

The immovable object is a wall of debt that now can't be paid back." BUSINESS WEEK SQUEEZED The News Dissector America As The Bubble Bursts Danny Schechter A Financial Tsunami • The Crim

paradox of what happens when an irresistible force meets

an immovable object The irresistible force in this case is the U.S economy The immovable object is a wall of debt

that now can't be paid back." BUSINESS WEEK

SQUEEZED

The News Dissector

America As The Bubble Bursts

Danny Schechter

A Financial Tsunami • The Crimes of Wall Street • In Debt We Trust

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© 2007 Danny SchechterFirst Edition

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where markets serve the public interest

By Robert D Manning, author of Credit Card Nation

Over the last decade, U.S industrial employment has been ravaged

by Neoliberal “free trade” policies and corporate outsourcing whileworkers have struggled to retain the basic vestiges of the AmericanDream Sadly, as the post-industrial society has eroded the indus-trial heartland of middle-class America, the mall has replaced thefactory as the engine of the US economy Indeed, one of the distin-guishing features of the “new economy” is that it is more profitable

to finance consumption than production And, as real wages havedeclined and basic living expenses have soared, American familieshave become increasingly dependent upon consumer credit anddebt to maintain their lifestyle and, too often, simply to survive.Social critic and journalist provocateur – Danny Schechter akathe “News Dissector” – deserves our appreciation for identifying yetanother crucially important issue that has been blissfully ignored bythe mainstream media and our national leaders – the consumerdebt time bomb While business pundits and media cheerleadershave deflected attention from the lack of a national economic poli-

cy, Schechter has focused his filmmaking and journalistic talents onthe seductive and calamitous consequences of banking deregula-tion Indeed, through his powerful and entertaining documentary,

In Debt We Trust, Schechter takes us behind the scenes where theprofits and power of the financial services industry are protected byfederal regulators, elected officials, and even the U.S SupremeCourt

Through his movie and the compilation of his most perceptive

articles in Squeezed, Schechter exposes the corporate forces that are

corrupting our fundamental democratic institutions of governancethrough a symbiotic financial-industrial complex: FINANCIALIZA-TION Already U.S Congressman Bob Ney (R-Ohio), past Chair -man of the powerful House Financial Services Committee, hasresigned over his influence peddling schemes and is currently serv-

ing a prison sentence Many others have left to become million lar lobbyists for the industry that they were once responsible forregulating Others, like past Secretary of Treasury Robert Rubin ofthe Clinton Administration have become executives of financialservices companies with multi-million dollar compensation pack-ages; Rubin was recently elevated from Senior Vice-President toChairman of beleaguered Citigroup as it grapples with its massivesubprime mortgage losses

dol-The problem with the deregulation of the U.S financial servicesindustry is who CAN or has the fortitude to save the new GildedAge Executives from a corporate ethos that exhorts: “Greed isGood”? From Sandy Weil who “earned” a billion dollars during hisdecade at the helm of Citigroup (which coincided with billions ofdollars in consumer class-action settlements for questionable busi-ness practices) to Stan O'Neal, the past CEO of Merrill Lynch whosegamble on subprime loans cost him his job and the company over

11 billion in losses, yet “earned” him a $160 million severance/retire ment package

Like the ENRON debacle that was perpetrated by the financialcomplicity of Wall Streets' largest banks, Schechter has led the clar-ion call for demanding corporate accountability for those whose

“creative” genius produced Collateralized Debt Obligations (CDOs)and other “securitarized” or asset backed securities that precipitat-

ed hundreds of billions of dollars of losses, potentially over a millionforeclosed homes, and the destabilization of the US financial sys-tem Indeed, like Enron's “mark-to-market” imaginary wealth, themanipulation of the mortgage securities and residential housingmarkets with low “teaser,” adjustable rate (ARMs), no interest, nomoney down, and “liar” loans, presaged the fictitious housing “bub-ble” and penultimate collapse of the real estate/consumer-driveneconomy

As Schechter perceptively explains, “Debt is Profitable” in aderegulated economy where “Democratization of Credit” meansthe best consumer is someone who will never escape the vise ofdebt servitude

With the rise of “Financialization,” Schechter not only nates the causes and invariable collapse of the US housing market– primarily because the Titans of Wall Street “could” rather than

illumi-“should” – but seeks to challenge the mainstream media to gate the truth rather than seek the platitudes of the “Smartest Guys

investi-in the Room.” Indeed, with the top ten credit card companies alongwith the two major credit card marketing associations (VISA andMASTERCARD) spending over $20 billion per year on various forms

of advertising, it is not surprising that editorial media “guidance”tends toward corporate compliance than muckraking exposes

As the subprime mortgage “crisis” subsides and business leadersplead for public bail-outs, Schechter is to be commended for lead-ing the investigative fervor over the emergence of America's con-sumer debt “squeeze” and culpability of banking execs in the dra-matic decline of U.S economic security

Indeed, Schechter was among the first to organize a national

“Stop the Squeeze” – (stopthesqueeze.org – campaign that is inten ded to help secure financial relief for America's increasingly indebt-

-ed majority

As Americans ponder the future of $100 barrels of oil and gic alliances with authoritarian petroleum producing countries, thereality is that our national dependence on cheap foreign energyresources could soon be dwarfed by our dependence on cheap for-eign loans Indeed, as public discussion shifts from the costs of mil-itary unilateralism to the global reliance on potential foreign policyadversaries, Capitalist America's economic security is becomingperilously dependent on Communist China for the cheap consumermortgage loans that have financed the US housing bubble and con-comitant consumer-driven economic expansion How ironic thatthe “Democratization” of consumer credit in the U.S has becomeinextricably linked to human rights abuses abroad It is these types

strate-of issues that the mainstream media has consciously avoided thatmakes Schechter's work all the more important in a society whosenew mantra is “In Debt We Trust.”

Robert D Manning, PhD Research Professor and Director, Center for Consumer Financial Services, E Philip Saunders College of Business Rochester Institute of Technology, Rochester, New York

PrologueMoney makes the world go round, and lack of it can make yourworld go down as it has for so many people around the world Thelaw of gravity is as relevant in this sphere as any other: what goes

up must come down And right now, in the United States, somemarkets are going down as a full-blown credit/debt crisis bringseconomic issues into focus Suddenly, stories that were buried in theback of the newspaper are up front as a new wave of economic painricochets from Wall Street to Main Street and back again Waves oflayoffs are rolling through the housing and finance sector whilebankruptcy filings and foreclosures multiply Suddenly reports of akind that we have been accustomed to read about in the news ofpoverty and downward mobility overseas are coming home toroost

There’s fear, uncertainty and even panic in the world of finance

In an interconnected interlaced system, when one sector implodes,others follow We are now hearing about what’s been called the

“Sub-prime crisis” as if only one small corner of the economy is inperil But, like a serious infection, when untreated, a disease canspread into the whole body and damage not only its well-being butthe confidence others have in it

That’s what seems too be happening in the financial markets

As Peter Morici explains in the Globalist, “Subprime mortgagesare hardly the whole credit market, but the meltdown of theirbonds cast a spotlight on the decaying integrity of investment banksand bond rating agencies… Over the last several weeks, creditorshave increasingly sensed they cannot trust banks or bond ratingagencies, and they have fled to short-term Treasury securities Thiswas much worse than the collapse of mortgage companies thatoriginated housing loans, because it caused all segments of thecredit market to collapse.”

Its been called a Ponzi scheme – a manipulated and criminalenter prise Writes Rodrigue Tremblay: “Like all Ponzi schemes, suchpyramidings of debts with no liquid assets behind them are bound

to implode sooner or later And that is what we are witnessingtoday, i.e the implosion of unfunded credit derivatives-based Ponzischemes.”

One consequence of this collapse, reports the Wall Street Journal,

is that the “wave of corporate takeovers seems to be waning.Homebuyers with poor credit are having problems borrowing.Institutional investors from Milwaukee to Düsseldorf to Sydney arereporting losses Banks are stuck with corporate debt that investorswon’t buy Stocks are on a roller coaster…”

Will the market “correct” itself? Will the contagion be contained?Will this immediate problem be fixed? Can the market bounceback? It’s possible on all four counts but, many experts agree, alonger term instability posed by the credit squeeze will continue tohaunt us There is major “infection” – a kind of financial flu –threatening the system in a way we haven’t seen in years, andAmerican media outlets and commentators across the politicalspectrum are finally paying attention and sounding the alarm.While most of the media focuses on the problems confronting verywealthy bankers and financial institutions who are likely to havethe means to weather this storm, far more cataclysmic challengesface more than two million families who may be losing their homeswhile others go jobless Many Americans are just beginning to feelmore economic pain as inflation and recession intensify

So far the debate in the business press has been about interestrates and “default exposure” and go over the heads of most readersand viewers At the same time, a few voices of a more critical kindwho put this problem in a different context are finally being heard.There’s the populist agitator Jim Hightower who says: “At itscore, this is a classically simple story of banker greed and outrightsleaze And the astonishing part is that nearly all of the rankinjustice perpetrated by today’s money changers is considered legaland is practiced by supposedly reputable financial firms.”

The writer Barbara Ehrenreich, a brilliant chronicler of economicproblems suffered by the working poor sees a potential upside – thefall of capitalism itself “The American poor, who are usually tactfulenough to remain invisible to the multi-millionaire class, suddenlyleaped onto the scene and started smashing the global financialsystem, “she writes in an essay about those seduced into taking so

called NINJA loan based on “no income, no job or assets.”

As borrowers default on mortgages and other bills, thereverberations cascade “Incredibly enough” she argues, “ this may

be the first case in history in which the downtrodden manage tobring down an unfair economic system without going to the trouble

of a revolution.”

What’s fascinating is that what may have seemed to be alarmistcriticism on the left has moved into mainstream journalism-especially overseas The Financial Times published in London, wasapoplectic in an editorial titled “CREDIT SQUEEZE – THEDISASTER MOVIE.” They compard the credit “squeeze” to “theplot of a hundred disaster movies,” writing, “the longer this goes on,the greater the risk to the real economy.” I enjoyed this becausemonths ago, CNN Money compared my film In Debt We Trust tothe horror Movie Carrie commenting the documentary is “evenscarier.” The Economist likened the subprime scandal to a “toffeeapple with a maggot at its core.” All of these news outlets say thisscandal is not going away anytime soon

Paul Krugman commented in the New York Times, “Maybe thesubprime disaster will be enough to remind us why financial regu-lation was introduced in the first place.” Interesting that he – aPrinceton economist as well as an op-ed columnist – also calls thiscrisis a “disaster”

The writer Lewis H Lapham sees a parallel between the collapse

of the U.S housing bubble and the war in Iraq that has eluded mostcommentators Writing in Harper's Magazine, he notes, “I wasstruck by the resemblances between the speculation floated on theguarantee of easy money on Wall Street and the one puffed up inthe preview of an easy victory in Iraq.”

These tensions are now or soon will impact on everyone, bly even bringing on a global recession or worse We are in whatseems to be another boom and bust cycle with global implications.Writes Economist Max Wolff: “So many shares, bonds, vehicles andfunds are bloated with leverage that fall-out will be significant Theharder central banks, politicians and pundits fight, the longer andmore volatile the adjustment Continued large central bank cashinfusions and rate cuts are in the offing Hundreds of billions havealready been infused.”

possi-With billions of dollars at stake, with millions of Americansaffected, with tens of thousands of businesses at risk, this is an issuethat demands our attention It also demands to be reframedbecause it is not just about finances or the market or businessmenwho made mistakes Its about a calculated crime, a deliberatestrategy to take advantage of a subprime lending initiative intended

to help people with poorer credit own their homes and turn it, withthe help of leading financial institutions driven by greed in to a way

to defraud them – and, in the ultimate irony, destroy many of theirown companies and financial markets Their corrupt pactices haveput the global economy itself at risk

This short instant book tells three stories

• It discusses how debt has restructured our economy and putour people under a burden that many will never crawl out of Itshows how access to credit has, for many, gone, in Steven Green’sphrase “from a luxury to a necessity to a noose.” It identifies theprofiteers and calls for an investigation and the prosecution of thosebehind this shrewdly engineered ponzi scheme

• It offers the critique of a media critic who has monitored flawedand superficial reporting on the subject and who is trying tochallenge the news media to improve its coverage the problem and

it also monitors some of what it has done It discusses the making

of my own new film intended to fill part of void The story of In

Debt We Trust: America Before the Bubble Bursts discusses itsimpact and the battle to get it seen

• It advocates a debt relief movement in America and argues thatsuch a movement would have tremendous resonance across thespectrum of political life It urges citizens to get involved andpoliticians to respond

This book draws on articles, blogs and essays written by ajournalist and filmmaker who is simultaneously learning aboutthese problems and alerting others to them It is a collection ofpublished pieces and new writing It is also a call to action

Danny Schechter, “News Dissector”

New York City December 2007 Comments to: Dissector@mediachannel.org

This instant internet E-Book, published by ColdType.net in Canada

in a first edition in the Adobe PDF format, was inspired by the dition of American pamphleteering exemplified by the work of theAmerican revolutionary Tom Paine (who, of course, has no respon-sibility for this effort) and the Soviet-era samizdat publishers forced

tra-to work underground

In our culture, we do have many publishers of small and largepresses but as someone who has had eight books published thatway, I know how long it takes to go from pitch or proposal to book

in hand And then the real battle begins for attention and tion in an environment dominated by big names and bigger budg-ets I don’t want to get into how many books reflecting years ofwork languish because of poor marketing and promotion

distribu-Often, issue-oriented books appear well after the fact, not whenthey can best stimulate or contribute to an ongoing debate.Publishing this way is more immediate, accessible and timely

Squeezedprimarily chronicles events over six months in 2007 andthe explosion/implosion of an economic crisis that had been build-ing for many years Happily, it can be available in this same year just

in time for the Christmas shopping season which the tors already fear will be a disaster

prognostica-It is the work of a journalist who often finds himself “ahead of

the curve.” My book Embedded: Weapons of Mass Deception on

the media war in Iraq was published by ColdType.net this way inthe early summer of 2003 in a stunning climate of patriotically cor-rect denial I can only hope that this one has more impact if onlybecause of the way so many institutions we trusted are losing thattrust so quickly And also, lest I remind you, how this affects ourwallets and financial survival

I am sure we will soon be deluged with barrels of more books onthe issues I treat, written by authors far more expert than I.Journalism has been called the “first draft of history” but this is ahistory we can, hopefully, still influence if we wake up and have thecourage to proclaim a state of economic emergency to do whatmust be done For starters, we need to arm ourselves with informa-

tion (or harm ourselves) and then drive the money changers fromour temples.

If you find this book of interest, please subscribe to the ColdType

Readerat ColdType.net and appreciate an effort that in our ket-driven, financialized and monetized world is being offeredwithout charge, but with professional caring, by Tony and JuliaSutton and, yes, with hope for the future

mar-D.S.

CHAPTER l: SOUNDING THE ALARM

Investigating The Nation’s Exploding Credit Squeeze 2

CHAPTER 2: CRITIQUING THE MEDIA RESPONSE

How Did We Miss The Signs Of An Impending Crisis? 10What’s Missing In The Media Coverage? 14Addressing The Media: The Media For Democracy Appeal 15

The Twin Disasters: California Burning Wall Street Churning 18The Secret Language Of Finance And The Words

The New York Times Looks Back

August 1: Stop The Squeeze Newsletter 37Stop Killing Kids Softly With Student Loans 39The Subprime Crisis Is Really A Subcrime Crisis:

The Mortgage Crisis Is Not Just About Abuses But Crime 47Battling In The Courts And Against The Courts 52

Contagion Could Lead To A Financial Tsunami 57

The Market: An Entity That We Can’t Even See 63

Shock Therapy On Wall Street: What’s Next? 70October 13: It’s Bad And That Ain’t Good 75

Is The Economy Out Of The Woods?: The Latest Jobs Report 80Debt: When The Political Is Also Personal 84Bush Vows To Help Subprime Victimes, Save The Suburbs 86

Is The Economy Out Of The Woods? 90The View From Europe: Fear Of A Disaster 94Needed: A Military Campaign For Debt Relief 95Humpty Dumpty Rides The Waves On Wall Street 98

CHAPTER 4: THE STORY OF “IN DEBT WE TRUST”

Using A Film To Spread The Word 104

Press release: Announcing Our Crusade 114The Failure Of Liberal Activism 115Eco Justice Fight Needs To Go Beyond Union

CHAPTER 5: DEBT AS A GLOBAL ISSUE

An Open Letter To Bono Re Debt Relief 127Will African Poverty Become History? 130

CHAPTER 6: RESOURCES

Quiz: Questions for A New Age 140Q&A With Danny Schechter (Alternet) 142

Author’s Biography Of Danny Schechter 145

“It’s the economy, stupid”

Maybe Bill Clinton was right in his first campaign for the presidencywhen he promoted a slogan that pushed economic issues to the top

of his agenda Since then, they have been eclipsed, and, for years,the fallout from 911, the debate over the Iraq war and focus on theimpact of the Bush Presidency have dominated our attention Butnow, economic issues are back with the intensity of a hurricane toforce us to confront them Speaking of hurricanes, Senator ChrisDodd has called the subprime scandal, “a 50 state Katrina.”And in the epicenter of this storm are two words that havetended to be buried: credit and debt

Usually, when we hear about economic distress, it takes place insomeone else’s country; often in Africa or some place you havenever visited conjuring up images of desperation and sadness Thesame is true when you hear about debt When rock stars like Bono

or Bob Geldof crusade for debt relief, they are doing so, howeversuccessfully – and there is a big debate about that – aroundconditions in what we used to call the Third World and what othersrefer to as Developing Countries, even when they aren’t

What is more rarely discussed is economic deprivation andexploitation in our own country and what we think of as “TheWest.” We may hear stories about individuals with problems but werarely hear about deeper economic forces and the institutions thatcreate and perpetuate the problems, Discussions of how our owneconomy has been transformed in a way that accelerates deepeconomic inequality and all the suffering that flows from that havebeen minimal

As a journalist, blogger and filmmaker, economic issues are notforeign to me I grew up in a working class home in a family ofunionized workers who spoke of the importance of solidarity with

people fighting for their rights and economic security When Ibecame active in civil rights and human rights movements, I wasexposed to how economic forces were driving the mistreatment ofminorities and workers in other countries.

When I joined the media, I sought to integrate my understanding

of these issues into my own work I quickly realized that the lack ofmedia attention to labor and the impact of economic policies keptimportant issues in the dark

As the mainstream media itself moved away from in-depthreporting, and towards a more superficial focus, distortion anddeception assured audience distraction

I spent many years writing about the need for media reform andthe decline in reporting that investigates economic power andspecial interests that often stack the deck against consumers As areporter myself, for years, I focused on human rights and thenmedia issues, but now I have come back to seeing how directly theeconomic system imposes itself, for good and, yes, evil, in everycorner of our lives

It wasn’t hard to realize that in recent years, our economy haschanged from one built around production to one centered onconsumption The mall replaced the factory as our dominanteconomic icon Debt has been key to restructuring this economyand keeping it flourishing

As a result, explains Stephen Pizzo, “America and Americanshave switched from being net creditors (money lenders) to netdebtors (credit junkies) And not just American Yuppies hooked oncredit cards and home equity loans No Siree Corporate America,the folks who got Americans hooked on living beyond their ownmeans fell for their own line and started doing so themselves.”Driving this change is a growing concentration of power in thefinancial and banking sector That, in turn, unleashed a processcalled FINANCIALIZATION with the economy dominated by avast CREDIT AND LOAN COMPLEX every bit as insidious as theMilitary Industrial Complex This Complex is shadowy andomnipresent, active in funding our politicians and lobbying for lawsthat benefit their businesses At the same time, it is invisible to most

of us It operates through a fog of shadowy lobyists, interconnectedinstitutions and highly legalized (and hence poorly understood)

rules, laws and procedures underpinning the market system and thehigh-speed computers that move money and buy/sell ordersaround the world in seconds

It is often difficult for outsiders to penetrate the dense languagethat define the rules of the games financiers play The outline of thewhole system only comes into view when there is crisis Recently,Jeremy Grantham, a leading investor, compared the finance system

to a large BRIDGE with interlocking pieces…

“Thousands of bolts hold it together Today a few of them have fractures and one or two seem to have failed completely The bridge, however, with typical redundancy built in (unlike the Minnesota one that collapsed), can (easily) take a few failed bolts, perhaps quite a few….

What is worrisome is whether or when we reach a “broad-based level of financial metal fatigue” causing simultaneous multiple bolt failures “with ultimately disastrous consequences.”

Stephen Lendman adds: “What’s also scary is the global financialstructure is heavily “faith based, held together by unprecedentedamounts of animal spirits” moving in the same positive direction Ifthe faith wanes, it’s then “every man for himself” and look outbelow….”

Before I take you deeper into this world, let me assure you that I

am probably considered totally unqualified to tell you any more I

am a journalist but not an economic specialist I went to the LondonSchool of Economics but studied politics, not economics, a.k.a., the

“dismal science.” I have never worked on Wall Street and am evenpretty hopeless in managing my own money, much less “OPM” –other people’s money I did a stint at NBC’s Business Channel CNBCbut on a talk show, not in the newsroom monitoring market shifts

I may not know a derivative from a tranche, but I think I doknow how to ask questions that the so-called Masters of theUniverse avoid The experts in this field are as divided as in anyother They usually do not agree with each other and are oftenmasters at keeping the public confused

In many ways, moneymaking is as much an art as a science Anddespite all the rules that govern the markets or regulations designed

to assure transparency and accountability, crooks, swindlers and

even gangsters are commonplace Corrupt practices are pervasive;regulation is not A survey of professionals in the field were askedhow they define criminal conduct The majority surveyed saidcrimes only occur when you are caught There is also extensiveposturing in the industry to mask the often-fuzzy line between riskand uncertainty In many instances, major decisions are made onthe basis of fragmentary knowledge, even ignorance, despiteprofessions of careful reviews and “due diligence.”

The Financial Times cites a market economist at Lehman whosaid:

“We are in a minefield No one knows where the mines are planted and we are just trying to stumble through it” A few days ago another market participant put it this way: “It is not the corpses at the surface that are scary; it is the unknown corpses below the surface that may pop up unexpectedly”.

So if the people in the know admit they don’t know, whyshouldn’t I opine and report on these issues? Many of the “experts”who I read or see on TV seem clueless, full of hot air Many of theirpredictions turn out wrong even when they seem so self-assuredand well informed in making them Hightower warns againstbelieving them, writing,

“Don’t be deterred by the finance industry’s jargon (which is intended to numb your brain and keep regular folks from even trying to figure out what’s going on).”

A folksinger, Ethan Miller, even sings about the way some of thealways all-knowing media pundits have turned their prognos -

tications into a form of entertainment – call it financetainment His

song is called “the Market Game.”

One lyric:

Does it seem like we’ve given up our power

To an entity that we can’t even see?

Oh, this is not the first time that it’s happened?

You can learn about the others on TV

How does one make sense of what is going on? After the NYStock market took a 340-point drop only to quickly recover, I went

to the business pages of the NY Times I figured that they wouldexplain it But THEY DIDN’T KNOW either reporting “Emotion

and psychology, not financial fundamentals were mostly at work.”They quoted the chief US equity strategist for Citibank who said, “Idon’t think anybody can make sense of it.”

Part of the problem here is that the traders and brokers havecome up all sorts of highly esoteric and complex financialinstruments – ways of securitizing debt and raising capital – thatoutsiders, even experienced journalists, have a hard timeunderstanding, much less explaining Ditto for regulators (and thelaws they theoretically enforce) who are hard pressed to keep upwith the pace of change Market traditionalists are also lost TheTelegraph of London reports:

“Even some bankers like Jean-Pierre Roth, president of the SwissNational Bank, who believes the market turmoil is far from overbecause tremors from the sub-prime debacle will continued to rockthe world is confounded Something unbelievable happened,” hesaid “People who had neither income nor capital got credit withvery attractive conditions Now reality is striking back.”

Of course he does not mention that the subprime loan was a wellthought out marketing scheme designed to seduce borrowers withpoor credit ratings who would pay more in fees and interest.Everyone complains that the system has got too complicatedeven for players who try to define their own reality Writes AndrewLeonard on Salon.com

“The truth of what is really going is far more complex Socomplex that no one has a good handle on exactly what willhappen if things go awry Not regulators, not traders, not evenpessimistic journalists Try reading an SEC filing from a New Yorkinvestment bank – it is one of the most difficult-to-comprehenddocuments ever created by the human mind…It is not, in a word,transparent It serves the opposite purpose: It is an instrument ofobfuscation,”

No wonder the media coverage is so confusing Perhaps that’swhy so much money is now being invested in upgrading anddisseminating business news

The market for financial and business news is big and gettingbigger There is a reason that Rupert Murdoch was willing to payfive BILLION for the Wall Street Journal and Dow Jones He spent

even more in creating, staffing, launching and marketing a newglobal business channel His maneuver came on the heels ofThompson acquiring Reuters while Bloomberg and the FinancialTimes announced plans to expand and compete

Bear in mind that this is not all being done only to inform thepublic Much of it is aimed at the industry itself and high incomeconsumers News organizations that specialize in business newsoften also make money from the information they don’t makepublic but offer in specialized newsletters or other “products” soldfor big bucks to elite customers Finance is itself an informationbusiness and the one most striking complaint heard among insidersduring a period of market volatility was that their panic was feeding

on a lack of knowledge about how much “bad debt” was in theirsystem It seems too be a mystery, even to them

For me, mysteries make challenging stories

I gravitated towards trying to understand, investigate and thenpopularize some of these fascinating issues because of the massiveimpact they are having – and because I felt our media was doingsuch a poor job in explaining and tracking them Now, thanks toeditor Tony Sutton, I am collecting articles, blogs and columns Ihave been writing on the issues in the hope that readers will findthem of some value, and perhaps use

Most of my writing on the subject came as a result of making In

Debt We Trust, a documentary film in hopes of getting the story out

to a larger audience Let me start with that:

The Film

In Debt We Trustbegan as a film about what I thought were otherpeople’s problems I came to realize how deeply they affect me aswell The experience of making this film has led me to understandhow many ways policies and practices are tied to a growingnational debt burden and have an impact on my personal finances.Even as a former network journalist and long-time investigativereporter, I was shocked and outraged when I started probing theroots of these issues

This is a problem involving millions of people and billions of

dollars yet it is downplayed and rarely discussed in all of itsdisastrous dimensions.

It’s about a growing inequality that some experts fear will lead tonew 21st century serfdom It’s about the transfer of wealth fromworking people into the vaults and accounts of a relatively smallnumber of financial institutions and real estate interests Thelenders are not only profiting by charging usurious rates but doing

so legally in part because they have mastered the art and science ofmarketing products and then manipulating our media, politiciansand political institutions to allow them to do what they want.Over the course of my career, I have made 20 films and wonmany awards and some recognition Most have been shown at top

festivals and aired on TV I am attached to all of them but In Debt

We Trust is different because it doesn’t just document suffering, itwarns of the implications of consequences that will affect all of us.Perhaps that’s why this issue cuts across party and partisan lines in

a way that can potentially unite a nation Perhaps that’s why mostlyeveryone I tell about the film tells me about how they have becomepersonally ensnared in the debt trap

My hope is that this film will spark a national response – ademand for economic fairness and justice, regulation in the publicinterest, along with a heightened sense of personal responsibility byconsumers seduced by the false promise of “free money.”

What’s been called the “democratization of credit” has led to thedemocratization of dependency It has created an unsustainablesociety, trapping millions in a financial hole they can’t escape fromand often do not understand

Over the past 25 years, America has moved from a society based

on production to a nation driven by consumption; from a countrythat once shared its resources with the world to one deeply in debt

to foreign banks and countries – to the tune of TRILLIONS ofdollars As the growing number of bankruptcies and foreclosurestestifies, our national debt is mirrored by a skyrocketing consumerdebt, with a growing number of individuals and families unable tocope

Says former Georgia Governor Roy Barnes, “It is shocking to methat intelligent people, educated people, have not taken time to

think about this We cannot sustain over an extended period of timethese high levels of debt particularly at high rates of interest.Because what will happen is that whenever it comes to an end and there is an end to the amount of credit in other words,when it gets so leveraged, it will create an economic crisis so deepthat it will threaten us as a nation And so we have this thisreal threat to the way we are as a people And nobody seems to beconcerned about it.”

In Debt We Trustis concerned about it Our focus is what to do

“before the bubble bursts?” And then while I was struggling todistribute it the bubble started bursting You would think thiswould make the film more timely

We set out to try to put this issue on the national agenda.Working with the country’s leading credit card expert and critic, Dr.Robert Manning, of Rochester Institute of Technology, we intend touse the film as part of an educational campaign to help individualsimprove their financial planning and encourage organizations to getinvolved in a campaign for change

Over the years, documentaries have helped prompt a national

discourse on many issues That’s my hope for In Debt We Trust,

which we have tried to make compelling viewing in a spirited style.Many at the TV news networks that I have worked with over theyears say you can’t cover complex issues, especially on economicquestions, because it is boring and a turn-off

My film is out to prove them wrong

The American public needs to know why debt has become “theenemy,” in the words of one of the people we interviewed AllAmericans need to know what we can do about it ●

THHEE UUNNIITTEEDD SSTATTEESS OOFF DDEBTT

Total number of Americans 300,000,000 Total consumer debt of Americans $3,000,000,000,000 Average debt per U.S household .$30,000 Number of households not paying off their credit card

balances each month 6 in 10 Average length of time, in months, spent paying off

credit card debt 43 Consumer bankruptcies in 1980 287,463 Consumer bankruptcies in 2004 1,500,000 Consumer bankruptcies in 2005 2,000,000Percent increase in bankruptcies 422 Amount the average college student owes in loans

by graduation $30,000 Amount that same student owes in additional

consumer debt: $20,000 Amount $1 invested in stocks in 1963 would have

compounded to today $12.36 Amount $1 invested in real estate in 1963 would

have compounded to today $1.79 Total in 2005 and 2006 lenders wrote in new

home mortgages $3,200,000,000,000 Net profit percentage annually by the major

credit card companies 54 Years it took for America to move from a society

based on production to a nation driven by consumption 25 Date when the first baby boomer will be eligible

for early retirement 1/1/2008

“The combined threat of subprime loan defaults and excessive indebtedness has supplanted terrorism and the Middle East as the biggest short-term threat to the U.S economy.”

National Association for Business Economics

Sounding the Alarm

My film on debt, like my earlier documentary on media coverage ofthe war in Iraq (WMD: Weapons of Mass Deception) grew outfrustration with and anger at media coverage of the issue That’s why

I leapt at the opportunity to assess what was being reported forHarvard’s Nieman Reports, a journal read by leading journalists andeditors I wrote my first article on the subject early in 2006 while I

was still working on In Debt We Trust

INVESTIGATING THE NATION’S

EXPLODING CREDIT SQUEEZE

WhenI started out, my film was going to be about other people’seconomic woes Pretty soon I realized I was part of this story of howthe credit industry targets poor and middle-class Americans Notonly was I a target, too, but all of us are

There is a credit divide in America that fuels our economicdivide Put another way, the globalization of our economy is aboutmore than outsourcing of jobs There is a deeper shift underwayfrom a society based around production, with the factory as thesymbol of American economic prowess, to a culture driven by con-sumption, with the mall as its dominant icon

My film In Debt We Trust combines story telling, often in a voice

laced with outrage, with investigative inquiry It’s about a nationwhere our credit score is the only score many people and institu-tions care about, and where vast databases record our every pur-chase and consumer choice Ours has become a nation in which thecarrot of instant affluence is quickly menaced by the harsh stick ofbill collectors, lawsuits, and foreclosures And yet, this bubble canburst: The slickest of our bankers and the savviest of our marketershave not been able to undo the law of gravity, that what goes upmust come down

Viewers of our film will be transported behind the scenes to meetthe biggest scammers of them, the engineers and operators of thebillion dollar credit card industry who have researched the detailsand minutiae of consumer needs as well as our shopping fantasies

so that they can deploy the deceptive art of seductive marketingand modern usury We will scrutinize a carefully conceived butstealth electronic web, designed to entrap, cajole, and co-opt themost powerful consumer culture on earth It teases us with a finan-cial advance when we want it, then sucks it away from us with moreforce than we realize

REPORTING THESE STORIES

In the old days the poor couldn’t qualify for loans Today, they areconsidered among the better risks because unlike the rich many feel

an obligation to pay back Steve Barnett, who worked in the credit

card industry and will appear in our film, explains: “These are theperfect customers They need credit, so they’re not all that con-cerned about interest They’ll take a higher interest if you will grantthem credit They’ll pay off a small amount each month so they’re

in a sense ‘on the hook.’ And because of their own sense of values

or because of their own background, their family background,they’re not likely to declare bankruptcy again Given the change oflaws that’s more difficult anyway.” And manufacturers now knowthey can spur sales by lending money to buyers up front and thenget them to pay twice – first, at the register, then with credit cardpayments, big interest rates and compounded interest

Given the ubiquitous nature of these practices – and the reasonswhy they exist and persist that stretch from corporate America intothe halls of government and revolve around issues of corporategreed and political favors – the expanding gaps between those whohave (and then have more) and those who don’t (but pay anyway)need to be explored and exposed by journalists I am raising thisissue, and suggesting ways that it can be reported, because I believethis is an essential story for us to tell

●Report more regularly on these credit issues; billions of lars are involved, not to mention millions of lives

dol-●Identify the key corporate institutions and contrast the pensation of their executives with the financial circumstances

com-of their customers

●Shine a spotlight on how special interests and lobbyists forfinancial institutions contribute to members of Congress andother politicians, across party lines, to ensure their desiredpolicies and regulations Investigate political influence affected

by campaign contributions Some reporting about this tookplace during the bankruptcy debate, but there has been littlefollow-up

●Examine the influence credit card companies have on mediacompanies through their extensive advertising

●Take a hard look at the predatory practices in poor borhoods, including subprime lending – and crimes commit-ted against poor and working class people, who are least able

neigh-to defend themselves Legal service lawyers tell me that theyare overwhelmed by the scale of mortgage scams involving

homes whose value have been artificially inflated.

●Focus attention on what consumers can do to fight back.Robert Manning, author of “Credit Card Nation,” explains:

“If ten percent of American credit cardholders withheld their monthly payments, it would bring the financial services industry

to a standstill At a larger issue, what we have to do is to get ple involved at the state level, get their state attorney generals involved, aggressively filing class action lawsuits and then putting pressure on key legislators to say, ‘This is unacceptable that they’re not representing and balancing the issues of commerce with consumers The balance is tilted dramatically against the average American.’”

peo-THE STORY’S KEY INGREDIENTS

Class struggle is assuming a new form in the conflict betweencreditors and lenders that reaches into many Americans’ homes,where each month bills are juggled and rejuggled with today’s cred-

it card bills paid by tomorrow’s new card Meanwhile, with interestcompounding at usurious rates, indebtness grows and people sinkeven deeper into debts they cannot manage In this conflict, compa-nies function as well-organized marketing machines while borrow-ers are forced to react as individuals Many are browbeaten withlectures about “personal responsibility” by corporations that onlypay lip service to any form of social responsibility

Centuries ago, we had debtors prisons Today, many homesbecome similar kinds of prisons, where debtors struggle with per-sonal finance issues The scale of indebtedness is staggering as con-sumers simply follow their government’s lead As of Christmas 2005the national debt stood at: $8,179,165,267,626.42 Break that downand each American’s share comes to $27,439.48, and our nation’sdebt increases $2.83 billion each day Add to that two trillion morefor consumer debt including mortgages That’s a lot of money.Who is really responsible for it? Few of us seem to know Andfewer appear to know what can be done about it “They’re nevergoing to be repaid,” says economic historian Michael Hudson whofor many years worked at Chase Bank “Adam Smith said that nogovernment had ever repaid its debts and the same can be said ofthe private sector The U.S government does not intend to repay its

trillion dollar debt to foreign central banks and, even if it did intend

to, there’s no way in which it could Most of the corporations noware avoiding paying their pension fund debts and their health caredebts.”

The government and big companies might not have to pay, butregular people do, as our collective consumer debt has doubled tothe past ten years With mortgage debt included, it has nowreached seven trillion dollars Hudson compares the plight of mil-lions of debtors in the United States to serfs of an age gone by: “Formany people, debts now absorb 40 percent of their income Somany people are paying all of their take home wages over andabove basic expenses for debt service And that’s rising In effect, 90percent of the American population is indebted to the top 10 per-cent of the population.”

The coffers of creditors – funded by the most prestigious banksand financial institutions – are swelling with payments for arbitrar-ily imposed late fees and rising interest rates that seem to be large-

ly unregulated Borrowing is now a national habit Fueling this shiftglobally has been our national debt – now in the trillions – as othercountries finance our trade imbalances and keep our economystrong Without that influx of money, the U.S economy would be incrisis Everyone in the know knows this, but they do little to dealwith it, relying on the theory that if it ain’t broke, don’t fix it.Occasional warnings and lots of noise surface about cutting thegovernment’s annual deficit, including a devastating report byComptroller General David Walker who compares the UnitedStates today to Rome before its fall He is dismissed as a “prophet

of gloom, and downplayed in the press as our debts keep growing.All of this borrowed money keeps people pacified and, for the mostpart, politically complacent for now

So many of us live beyond our means How this shift has beenengineered through corporate decisions that are aided and abetted

by government polices isn’t shown in news reporting Questions of

by whom and for whom need more and better investigation, as well

as a look at who are the losers and who are the winners

Business reporting that focuses on the up ticks and downticks ofthe market provides little room for explanation, analysis or con-necting-the-dots journalism In part, that is a result of the fact that

many of our major media companies don’t operate in a world apartfrom these pressures At least ten credit card solicitations havearrived recently in my mail, and the Disney (owner of ABC televi-sion network) card was in that pile Many credit cards boast of part-nerships and discounts from media companies and entertainmentproviders, from subscriptions to DVDs Like car companies and air-lines before them, the media industry has discovered that there’smoney to be made in the credit business, and so credit card compa-nies become big media advertisers Why alienate them?

This credit squeeze is hitting the news business, too Jobs arebeing cut and reporting trimmed Joe Strop of Editor & Publisherobserved in his 2005 media wrap up, “Using the bizarre premise thatnewspapers can bring back lost circulation and ad revenue by mak-ing their products worse, top executives at major chains from TheNew York Times Company to Tribune took a butcher knife tostaffing with buyouts and layoffs that appeared almost epidemic.”What happens to news business employees laid off in this envi-ronment? Like those in other industries where cost-cutting leads tounemployment, they enter what insiders in the credit business call

“the turnstile,” living on more and more credit from their cards,soon to be followed by a dip into home equity Nor have wages andbenefits kept up with inflation, and many are being cut Health careextensions after a job ends are over within a year, and then what?What’s the alternative? More debt is one of the few accessibleoptions The turnstile keeps turning as personal debt keeps grow-ing

These issues and scams can be reported, and they must be, notjust in consumer advice columns and soft features, but also withhard-hitting and serious investigative reports ●